Reference no: EM133008630

Question - Geller Limited, a public company, reported the following amounts in the shareholders equity section of the Balance Sheet on December 31, 2020:

Preferred Shares, $8.00 cumulative and non-participating (2,000 shares issued and outstanding) $200,000

Common Shares (25,000 issued and outstanding) 100,000

Contributed Surplus on retirement of common shares 155,000

Retained Earnings 250,000

Accumulated Other Comprehensive Income 75,000

a. January 1 - purchased and cancelled 3,700 common shares for $35.00/ share

b. January 1 - issued 1,000 preferred shares at $105 per share

c. March 31 - declared a 10% stock dividend on the common shares. The trading price of the stock on that date was $45 per share

d. April 30 - issued the stock dividend

e. December 31 - declared a total dividend of $70,860 for the year

f. December 31 - options were granted to the CEO for 25,000 common shares at an exercise price of $48, the current market value. The vesting period is four years from the date of grant. An option pricing model (e.g. Black-Scholes) has determined that the fair value of the options is an aggregate of $72,000. These options were granted as a replacement for an annual bonus plan based on a percentage of net income.

Required -

Prepare journal entries to record the transactions that took place during 2021.

Prepare the shareholders' equity section of the balance sheet at December 31, 2021. Assume 2021 net income was $450,000 and comprehensive income was $475,000.

On January 2, 2026 the CEO exercised the stock options. Prepare the journal entry on the exercise date.